Companies under NCLT watch voice concerns over liquidation, raw bidders

With Kolkata-based Nicco Corporation going through liquidation, other companies whose cases are being examined by the National Company Law Tribunal (NCLT) have raised concerns over the manner in which the process is evolving.

On Tuesday, the Kolkata bench of the NCLT ordered liquidation proceedings against Nicco Corporation, a cablemanufacturing firm, after its lenders voted against the corporate resolution plans prepared by the company.

“In asset liquidation, nobody stands to benefit. Since here the assets, not the company, are being sold, and since the assets are of depreciating nature, nobody gains, not even the lenders,” a senior executive of an NCLT-listed company told Business Standard. “If the company is sold, at least there is an enterprise value. In this process (liquidation) there is nothing for anyone. That’s not all. Asset liquidation will impact the businesses of ancillary units that rely on the company. And, employees of the company will be penalised for no fault of theirs.”

Bhushan Steel, Monnet Ispat, Essar Steel, and ABG Shipyard are among the 12 firms referred for insolvency proceedings in June on the directive of the Reserve Bank of India because they had defaulted on their loan obligations.

Promoters’ loss

An executive of another entity with the NCLT raised concerns over the buyer via a bidding process. “Companies with no expertise or background in the relevant business are bidding for these (NCLT-listed) companies, perhaps because they have the requisite funds,” he said.

“Promoters have not just taken decades to build these companies, but these companies have once been strong contributors to the country’s gross domestic product (GDP) growth. Leaving it with new owners that do not have any knowledge or plan for this business is not going to yield anything. This will only help lenders recover their funds and exit. This is very damaging for the economy in the long run.”

In the case of ABG Shipyard, Shapoorji Pallonji Group, Mahindra & Mahindra, and the UK’s industrial and metals company Liberty House have entered the fray to acquire the debt-laden company. Headed by ICICI Bank, the lender consortium of the company is looking to sell the company to recover its dues.

“There is not enough clarity in the law. We do not know what we are going to achieve at the end of all this. NCLT-listed companies’ expenses are simply going up in paying for lawyers, consultants and the staff. Moreover, there is so much paper work that there is not enough manpower with the company to take care of it,” said another senior executive of a third NCLT-listed entity.